Decision means net users won't be disconnected from net for piracy without courts

Content owners pressuring government to change laws

A damaging blow has been dealt to the giants of the film industry in the High Court today after it decided to dismiss their copyright infringement appeal case against internet service provider (ISP) iiNet in a landmark ruling.

The High Court's five judges unanimously dismissed the appeal. In a summary of their judgment, the court observed that iiNet "had no direct technical power" to prevent its customers from illegally downloading pirated content using BitTorrent, a popular protocol used to share files online.

llustration: Harry Afentoglou

But copyright law experts say the case is not the end of the story as more ISPs could be targeted in future and pressure will remain on internet providers to do something about piracy on their networks. The Australian Federation Against Copyright Theft (AFACT), which has been representing the studios in media commentary and in court, is already pressuring the government to change copyright laws to crack down on piracy.

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Today, the court said iiNet's power to prevent customers from pirating movies and TV shows "was limited to an indirect power to terminate its contractual relationship with its customers".

Further, the High Court said that infringement notices sent by the film industry to iiNet did not provide the ISP "with a reasonable basis for sending warning notices to individual customers containing threats to suspend or terminate those customers".

If the film industry had won, the decision had the potential to impact internet users and the internet industry profoundly as it sets a legal precedent surrounding how much ISPs are required to do to prevent customers from downloading movies and other content illegally.

iiNet CEO Michael Malone welcomed the ruling and said Hollywood should now focus on increasing the availability of lawful content in a timely and affordable manner. "We have consistently said we are eager to work with the studios to make their very desirable material legitimately available to a waiting customer base - and that offer remains the same today," he said.

iiNet was picked on by the studios, he said, because it was one of the first internet providers to offer fast and high volume packages. And cables from the US Embassy in Canberra - leaked through WikiLeaks – indicated the studios did not want to take Telstra to court because they had commercial relationships with the telco giant.

iiNet was seen as "big enough to be able to defend the case, but not so big that we might succeed", Malone said. "And they got that wrong."

The High Court dismissed the appeal with costs. iiNet said legal costs of the case to date were approximately $9 million and had already been expensed.

The film industry – and content owners more broadly – want ISPs to send warning notices and even disconnect customers from the internet following allegations of copyright infringement. The ISPs have long said that content owners already have sufficient remedies through the courts and it is not the job of the ISP to decide whether someone is guilty of content piracy. The courts have so far sided with the ISPs on this point.

Recently content owners and ISPs have been back at the negotiating table over this issue however it is understood that a consensus has yet to be reached. The Communications Minister, Stephen Conroy, has previously said that he was awaiting the outcome of the iiNet case before deciding whether new legislation was needed to crack down on illegal downloaders.

The Australian Federation Against Copyright Theft (AFACT) is ramping up the pressure on the government to act. It said today's judgment exposed the failure of copyright law to keep pace with the online environment and the need for the government to act.

"It would seem apparent that the current Australian Copyright Act isn't capable of protecting content once it hits the internet and peer-to-peer networks...," AFACT managing director Neil Gane said.

He added that over half the usage of iiNet's internet service by its customers (measured in volume), was represented by BitTorrent file-sharing, and that this was why the film studios went after the ISP in court.

"Now that we have taken this issue to the highest court in the land, it is time for government to act," he said.

"We are confident the government would not want copyright infringement to go on unabated across Australian networks especially with the rollout of the NBN."

Discussions - which Gane labelled as "constructive" - between rights holders and ISPs held behind closed doors in the last seven months and mediated by the Attorney-General's Department would likely continue, he said.

"We will be having discussions with other rights holder associations in the short term and then I anticipate further discussions with governement in regards to what their approrpoiate recommended process should be."

He said AFACT would be proposing on behalf of the studios "some sort of legislative fix" where "appropriate action" could be taken to deter infringements occurring on Australian ISP networks.

A spokeswoman for Attorney-General Nicola Roxon said the government would examine the judgment closely.

"Industry stakeholders have been meeting regularly during the last year to develop a code of conduct to address the issue of illegal downloading," the spokeswoman said.

"The Attorney-General's Department will continue to facilitate these discussions and we hope that industry will continue to work together to find a range of solutions to illegal downloading."

Michael Speck, a copyright expert who ran the music industry's case against Kazaa, said: "In losing the case [the film industry] still got from the courts a clear road map for how to successfully prosecute ISPs in the future and the next ISP that is prosecuted will find it almost impossible to avoid liability."

"Of course any new case can be brought against any new defendant with any new facts including whether they have gone through a more detailed road map of specifying the particular breach," he said.

"But what the Chief Justice made very clear is that if you are going to take action against end users it has to be through a legal process. It can't be simply the content owners asserting to the ISP that they should breach their contract with their customer and therefore the road map is not complete in so far as it doesn't include a legal process against the user."

Intellectual property lawyer David Moore, of legal firm Cornwall Stodart, said for now ISPs are not responsible for the infringing conduct of their users but he believes this will change.

"At some point if the level of infringement by a particular user is of a certain scale and is repeated then ISPs will be expected to work with the copyright owners to take action and I feel that's the way that things are heading sort of based on the full Federal Court decision and now the High Court decision," he said.

"It's almost forcing ISPs to work with the copyright owners to cut out illegal downloads and the question of how they work together is perhaps somewhat grey. There's several issues floating around about the cost of putting in place, or the cost to an ISP of enforcing a policy that involves sending out warning notices and potentially terminating or suspending accounts."

But Hamish Fraser of Truman Hoyle Lawyers said: "I think most practitioners struggle with the idea that an ISP should be liable for the downloading of its users."

Heitman said the decision meant that internet users could be confident they would not be disconnected from the internet without a proper legal process and court order.

"It means that the content owners needs to decide if they are going to continue to try to keep hold of their 20th century business model or open an online shop," she said.

Heitman said that while it was unlikely, content owners could still sue individual downloaders.

"In the United States recently content owners that have tried to apply to ISPs to get a full list of the names and addresses of the people downloading have been told that they will not get that relief from the court because they are not genuinely intending to use the legal process," she said.

The suit against iiNet was first filed in November 2008 by a group of the biggest Hollywood studios including Village Roadshow, Universal Pictures, Warner Bros, Paramount Pictures, Sony Pictures Entertainment, 20th Century Fox and Disney, as well as the Seven Network.

The film studios had sued iiNet arguing that by not acting to prevent illegal file sharing on its network it was essentially "authorising" the activity and was therefore liable.